AOL beats Freeserve to first net profits

The groups flat-rate subscription model is making the switch to broadband easier. Report by Paul Durman

IT IS HARD to imagine now, but when Karen Thomson took over as head of AOL UK in 1999, the internet service provider looked as if it was facing extinction.

Its American parent was still months away from announcing the $112 billion merger with Time Warner that would create the world’s biggest media group. But more immediately worrying for Thomson, the launch of Freeserve had just turned the UK internet market on its head.

Since its launch three years earlier, AOL had steadily acquired 400,000 customers who paid a monthly subscription, but it was quickly overtaken. Freeserve’s early success seemed to undermine the very viability of a subscription-based internet business.

Internally, AOL wrestled with the fear that consumers would switch en masse to Freeserve and to other